Over the last year we’ve seen developers scrambling to find “value add” features to new game purchases. Their goal is to convince the customer to buy new instead of used because developers don’t see a penny from a used game sale. While GameStop sees 48% profit margins from the used game market developers struggle to stay floating in the industry.
This is not the fault of GameStop and their 48% profit margins because they’re only getting 7% to 20% profit margins (say analysts) on new game sales. As someone that’s run a game store online, if you’re getting 15%+ on a new game you’ve got some great hookups in the distribution channel or are buying in huge quantities.
Buying games in huge quantities to build profit margins can be a huge mistake in this industry. Gamers are fickle little creatures and they’re going to buy their top tier games for a few weeks and then sales will drop significantly. No retail chain wants to purchase a thousand copies of GTA IV (only as an example) and sell seven hundred over the first few week to be stuck holding onto a few hundred copies when the dust settles. Now you’ll have to put them on sale to get them out of the store because the hardcore gamer have already done their shopping and you’re not going to get any price protection if you’re not a major player in the industry.
Why take 7% profit margins when you can get 48% on a used game? The gamers don’t seem to mind because they’ll trade in a used copy of a sports title like Madden to save $5.00 on the latest franchise release. Gamers will buy Fable 2, beat it in a week and rush to the store to get the “most for their dollar” before the game gets stale and buy-back prices drop like a stone. Why not rent Fable 2 and save yourself $50.00? Of course, renting pisses off developers as well because they see no additional revenue.
While the economy struggles and consumers fight for their jobs, the entertainment side of life continues to grow. People would rather “cocoon” in their homes playing video games and watching movies on their brand new HD television because it takes them away from the low points of the economy if only for a few hours. History has shown us trends in entertainment during the down points of economies, it’s natural to want to get away for a bit.
But, consumers want to play these games on the cheap because their job may not be there tomorrow. Saving $5.00 knowing the store just took the title in for half the price doesn’t bother you; $5.00 in your pocket is better than in their pocket right? The fact that they just pocketed upward of 40% on the game doesn’t matter to you — it’s all about your bottom line!
While we’re bargain hunting during the recession developers are going to try and up sell you to a new copy of the game. If that means giving you special game items and features with a “one time code” upon purchase, it will be up to you to decide if it’s valuable. All the while GameStop will lock out the game industry from selling used games because 42% of their overall gross profit is from used game sales.
You, the consumer, benefits from a slightly cheaper game, bargain bin fire sales and additional game features if you do choose to buy new. The economic down turn is a great time to be a gamer, as long as you remain employed.
Nintendo plans to capitalize on the monumental success of Wii Sports by doing what they do best, building a hot game with an accessory backing its success. The new Wii Sports Resort will be a mini-game set like Wii Sports and Wii Play but with a beach setting and games like frisbee.
Had to re-write the message … lesson learned: don’t rush into rebooting your computer.
I also noticed that I skipped an episode 🙁 …
@EA gets exclusive license to publish Star Wars games, powered by Frostbite 3 engine
Yay, quick profits, here we go! Sure, it’s easier to license an IP rather then keep a studio. There is however the issue of quality: would people like “Call of X-Wings”?
Jonah, the name of the studio was Westwood. They did all C&C games up to and including Renegade. Not sure how many of the devs remained with EA though, after the studio was aquired.
@The Sims 4 officially announced by Electronic Arts
The time of CD key for EA has passed :P. This time they’ll be putting DRM first, but drop the MMO-like requirements. I expect an on-line DRM, but with much less bandwidth requirements. Think of Assasin’s Creed as opposed to Diablo III.
Don’t you dare edit the “fucking seasons”!
@Michael Biehn hints at Far Cry 3 Blood Dragon sequel
Could be a lot of wishful thinking, if you ask me.
@Spiritual successor to Eternal Darkness hitting crowdfunding on May 6
Is there a success story that involves an old IP that the publishers forgot about and crowd funding? So far everything I heard of are just projects in development, so I’m asking: was something similar to this released?
@Gearbox dismisses Aliens: Colonial Marines lawsuit as “beyond meritless”
The lawsuit is meritless. Unless there’s a written document, signed by all parts involved, that the game will not contain human opponents, it won’t stick.
Yes, what they did is bad. Yes, we don’t learn the lesson. We never do. Yes, we’ll most likely still pre-order games.
@QOTW:
Hard to name a particular generation. I liked the ’90s in Romania, with their NES clones and pirated cartridges. The whole experience was new, and there were so many games to play!
I also liked the 2001-2005 period. It’s then when I turned to the PC.